A method encodes an image of a video sequence by analyzing motion in the video sequence to identify a coherent region in the image that has moved with a distance vector which is longer than a threshold since a previously encoded image in the video sequence. A cost for inter-coding the block is calculated as a combination of a cost for encoding a motion vector and a residual. For at least one block of pixels in the coherent region, the cost for encoding the motion vector is calculated relative to the distance vector of the coherent region instead of being calculated relative to a motion vector of a neighbouring block of pixels in the image. The block is then inter-coded if the combined cost for encoding the motion vector and the cost for encoding the residual when combined are below a cost for intra-coding the block of pixels.